MetLife Sells its Banking Unit to Avoid Strict New Fed Regulations

In order to avoid new federal rules and heightened scrutiny from the Federal Reserve and other regulators as a "systemically important financial institution," MetLife has decided to sell its banking unit. MetLife (MET) is the largest life insurer in the U.S., and joins competitors AIG (AIG), Hartford Financial Services Group (HIG) and Allstate Corporation in selling off banking operations to escape from added restrictions.

We have a price estimate of $49 on MetLife's stock, implying a premium of about 15% over the current market price.

MetLife's Banking Operations at a Glance

Through MetLife Bank, the company offers a variety of mortgage and deposit products. Mortgage products offered by MetLife Bank include forward and reverse residential mortgage loans, while deposit products include traditional savings accounts, money market savings accounts, certificates of deposit and individual retirement accounts. MetLife Bank accounted for about 2% of the company's first quarter operating earnings.

MetLife plans to continue offering mortgage products after the proposed sale of MetLife Bank on a state-by-state basis.

How This Affects MetLife

The sale of MetLife Bank and a restructuring is the wisest course of action for a company with the vast majority of its businesses in the insurance sector. It doesn't make sense for MetLife to allow itself to be governed by regulations written for banking institutions, rules which could make it less competitive in the insurance market. The sale will put MetLife on a level playing field with other insurance companies that don't have banking operations.

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